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YotaPhone 2, in either white or black finish, showing the e-Ink display.

Matthew Kelly, who is a one-man band of sorts for the startup Yota Devices, stopped by Barron’s offices Tuesday to talk about the phone maker’s entry into the United States.

We last saw Yota at the Consumer Electronics Showin Las Vegas in January, when CEO Vladislav Martynov was manning a small table at the sidelines of the show, fielding lots of interested visitors wanting to try out the recently introduced YotaPhone 2.

Turns out, Yota was in talks with various U.S. carriers at that time, says Kelly, but also was approached by crowd-funding site IndieGoGo, which appealed to the company to make its U.S. entry an online funding affair.

That campaign is now live, and as Kelly sat in Barron’s offices, we watched on the e-Ink screen of his phone as the tally of pledges ticked up past $67,000 after just a few hours. As of this writing, 160 people have pledged $82,411 to get at least one YotaPhone 2, in some cases two. The phones now fetch $525 each in their unlocked state.

Phones are expected to be delivered to backers by August.

Kelly says Yota is still talking with those U.S. carriers, especially T-Mobile US (TMUS).

“The results of the IndieGoGo campaign will give the carriers the data they need to see to know that this is something they should back,” he says, suggesting that there may be deals at some point with T-Mo, or perhaps Verizon Communications (VZ), or AT&T (T), though nothing’s certain.

Kelly, who came to Yota about a year ago, after stints with Nokia (NOK) and China‘s ZTE, knows it takes a while to navigate the many hurdles of opening a new market. From his offices in upstate New York, he alone is helping to coordinate the carrier talks, the IndieGoGo operations, and, eventually, some form of marketing beyond these initial guerrilla efforts.

The two sides of YotaPhone: The normal AMOLED color display on the left, the e-Ink screen on the right.

Yota’s premise is a simple one to them: better battery life. The YotaPhone2 made a name for itself, like its predecessor model, by having both a conventional AMOLED color screen, and also a grayscale screen using the e-Ink technology used in the Amazon.com (AMZN) Kindle e-book reader. The two displays occupy the two sides of the phone, the front and back, depending on where you’re looking. While the e-Ink screen is always showing something, just like a Kindle, the AMOLED screen remains off most of the time, serving as the back surface that you grip with your hand.

Holding it in your hand, the Yota’s e-Ink display is as thrilling as the first time you ever saw a Kindle. The screen is crisp and beautiful. Important basic apps, such as message notifications, a remote control for your TV, and the music player, are “always on” — the controls are right there, so you don’t need to turn the phone on.
If you don’t turn on the regular screen as much, and instead use the power-efficient e-Ink screen to glance at information or to carry out tasks throughout the day, you can extend the uptime of the phone’s 2500-mAh battery. (Yota is selling a neat wireless charging peripheral, a little black slab with curved sides, that will give the phone another charge and a half just by resting the Yota on top of it. Some may note it bears a resemblance to the wireless charging “touchstone” that Palm offered with the “Pre” smartphone some years back.)
In a sense, some of the functionality of the Yota is rather like the things you are supposed to do with wearables, such as Apple‘s (AAPL) Apple Watch.

In fact, Kelly, who sports an LG G Watch R smartwatch for that purpose, notes that he is using the watch less and less because his Yota’s e-Ink screen is always on, making it possible to just glance at phone rather than the watch, while also having greater interactivity.

YotaPhone 2 uses Android’s “Mirror Mode” to show the full Android UI on its e-Ink screen, when necessary.

Yota’s signed up some lead apps makers, including Twitter (TWTR), and MusicMatch. The stripped-down versions of their apps running on the e-ink display seemed well thought out. Yota provides a software development kit that will let companies take their existing Android apps and put a new front-end on them that can display on the e-Ink screen. It’s been hard, he notes, go get Barnes & Noble (BKS) to support the platform with their e-books, nor has Amazon bought in, and Yota has had to find other e-book partners such as BookMate.

Fortunately, for any app that can’t or won’t be modified for the e-Ink display, Yota is able to use the “mirror mode” provided by Google‘s (GOOGL) Android software.

Mirror mode came out of the Android team’s desire to support dual-display hardware. But there never was any suitable test for it until Yota showed up. The mirror mode lets the e-Ink display show the entire Android desktop in a grayscale mode. The performance is slightly slower, because e-Ink doesn’t refresh with the speed of AMOLED. But it means all functions and apps on Android can be used through the e-Ink screen, not just those re-written for the display, so you can continue to use the Android versions of Kindle and Nook.

Harrigan says Google have been very helpful and cooperative, and in fact they invited Yota to come to next week’s “Google I/O” developer conference in San Francisco, specifically to participate in discussion of applications for business users.

Another partnership that will get a lift with Yota’s push into the U.S. is with E Ink Corp., the Boston-based startup that makes the underlying technology. “They’ve always been very supportive, but I think having us here in their backyard will help things even more,” says Kelly.

The Android “Lollipop” app switcher seen in grayscale e-Ink.

Kelly, whose formal title includes “head of global alliances,” notes the other fronts on which the company is moving. Sales in Europe are “good not great,” says Kelly. The European model is mostly direct sales of phones unlocked, and it’s a very crowded market, which makes it hit or miss whether the company finds buyers. Yota is going to start selling in mainland China next month, through a distributor, which will be “amazing,” Kelly told me. He says sales in Latin America are also going to begin this summer, through a partnership with America Movil (AMX), again, some time around August. Sales are already happening in the Middle East, though Kelly says it’s a tough market to crack given the wide variance in markets from country to country in the region.

Coming next year, of course, will be the YotaPhone 3. While it’s too soon to offer up a spec sheet, things that can be expected to be included would be an octal-core processor (today’s unit uses a quad-core Qualcomm (QCOM) Snapdragon 801 processor), and an e-Ink screen that is more “edge-to-edge,” with less bezel in the way. Yota’s also mindful, said Kelly, of many requests among users for a lower-priced model, and there’s been some consideration given to possibly having a version that’s priced below the top-end, perhaps more like $400.

As one sharp-eyed reader observed, I was remiss yesterday in not picking up on an initiation of coverage of Internet names yesterday by Morgan Stanley’s Katy Huberty, including Amazon.com (AMZN), Alibaba Group Holding (BABA), and eBay (EBAY).

Huberty takes the broad view that it is “early innings” in global e-commerce, with the entire industry rising by 19% in the coming five years.

E-commerce is one of those tech “megatrends” that will tend to pick up steam rather than peter out, she thinks:

From a high level, we believe the knee of the curve in eCommerce growth is still in front of us. The history of the technology market suggests mega-trends, like mobility, virtualization, and online music, tend to accelerate rather than decelerate at higher penetration rates. This is a function of addressing the hurdles to adoption in the early years – such as fast enough data networks for smartphones, storage and networking bottlenecks for virtualization, or product assortment and shipping costs in eCommerce that only come with scale. Additionally, there is a network effect whereby when 20% of consumers and/or corporations have adopted a technology, peers tend to see that progress and want to follow suit. Twenty percent penetration is the typical knee of the curve, as seen in the global smartphone market in recent years.

Here’s the infographic of the knee in the curve for e-commerce versus other megatrends, using the U.S. as the primary example (click on the picture to see a larger version):

In emerging markets, willingness and ability to go on line is going to catch up in the coming two years: “By 2018, we expect half of the online population in these emerging markets to shop online, not far off from the 63% average penetration in more mature markets.”

Here’s the infographic for emerging markets e-commerce development:

E-commerce, observes Huberty, is pushed by mobile phone usage, which is going to hit half the populariont by 2018:

Using the US as an example, the penetration rate of eCommerce as a percentage of retail sales nearly doubled in the three years after smartphone penetration hit 50% (increased 3.4 points from 2010-13) as compared to the three previous years (increased 1.9 points from 2007-10). In fact, the correlation of eCommerce and smartphone penetration in the US is nearly 100%.This is an important takeaway as we expect global smartphone penetration to hit 50% by early 2018, the same year we expect eCommerce in large markets like the US and China to hit the important 20% penetration rate in large markets like the US and China which tends to be the knee of the curve in technology adoption. The combination of these catalysts could accelerate eCommerce growth in 2018 and beyond – a trend not reflected in consensus estimates.

Moving to her initiations, Huberty starts Alibaba at Overweight, with a $111 price target, she likes the company’s sizable runway in China’s e-commerce market, its immersion in people’s lives, and the lack of dependence on infrastructure such as warehouses:

We see further significant opportunities in China’s US$3trn consumption market. Its asset- light model provides scalability and strong cash flow to fund investment in talent, technology, products, and strategic assets. While e-commerce is its core business, Alibaba’s stated long-term ambition is to be a part of all aspects of a consumer’s daily activities: “Meet, Work and Live at Alibaba.” Alibaba’s data insight is a key competitive advantage, in our view, supporting creativity in moving beyond e-commerce.

Regarding Amazon, she starts it at Overweight as well, with a $420 price target, arguing that profit can beat expectations as it rolls back some investments, and that it may not be getting credit for the $32 billion value of its Amazon Web Services cloud computing business.

First, we see several areas of sub-par return on investment, including Fire phone and China, and management now appears ready to pullback in one or both of these markets. Second, reduced investment and improved operating income in coming quarters suggests the stock has bottomed post the recent operating income reset. Historically, AMZN shares outperform significantly post a reset in consensus EBIT expectations. Third, metrics that are key to our thesis actually improved in 3Q14 – including record incremental eCommerce gross margin and accelerating North America Electronics & General Merchandise (EGM), 3P and AWS growth. Lastly, ownership among top holders was near lows in June and anecdotally these positions have come down over the past four months.

Notably, Huberty, who has an Overweight rating on Apple (AAPL), thinks the iPad and other tablets will cannibalize sales of e-book readers such as Amazon’s Kindle, and so she thinks the company should curtail future investments in the device:

While eReaders were an important catalyst in kick starting the eBook trend and accelerating Prime adoption, users now spend more time on tablets or larger smartphone screens that can easily provide Kindle-like functionality. Similarly, we are cautious on Kindle Fire Tablet / Phone sell-through, as the tablet market becomes more competitive and growth slows in developed markets. IDC predicts that demand for eReaders is declining at a 27% CAGR between 2012 and 2017. With Kindle eReader holding 80% share in the US and 47% worldwide, Amazon’s revenue is likely to be cannibalized by tablets and larger screen smartphones.

Huberty thinks the company’s lead in established markets is under appreciated:

Amazon’s increasing lead in core markets is underappreciated by investors who view these countries as more mature and slower growth, and therefore as less attractive investment opportunities. However, we’d point out that Amazon’s GMV from its core markets not only grew faster than total eCommerce in each of its core countries, but its 27% CAGR was on par with the 28% CAGR for the global eCommerce market over the same period (2010-2013). According to Euromonitor, Amazon’s core market GMV CAGR was on par with or better than the eCommerce growth in every other country we consider as secondary or emerging, except for China and India where the addressable market grew about 60% over the same period. While investors would like to see Amazon shift focus outside the core, we see lasting and perhaps even accelerating growth opportunities in these markets and view Amazon’s ability to win in non-core markets, like China and India, as limited.

As for eBay, she starts it at Underweight, with a $45 price target, writing that it will need to make “meaningful investments to re-focus” the two parts of the business, the “marketplaces” auction side, and the PayPal unit, leading to lower profit up-front as eBay tries to transform the auction side:

We see the need for incremental investments in two key areas: (1) After investing in the Marketplaces technology platform, eBay must re-focus its branding efforts to help elevate awareness of the company’s fixed-price platform, particularly with millennials where the company underperforms peers. (2) As the high margin (nearly double PayPal average) on eBay Payments business falls below 30% mix, the company must invest aggressively to replace this profit base. With incremental revenue from areas like Braintree and large merchants where margins are lower, revenue growth must actually accelerate to maintain profit growth, in our view. Key areas of incremental opportunity include international, offline, and mobile partnerships. As a result of these investments, we model combined company operating margin falling from 25.6% in 2014 to 23.5% in 2015 and 21.9% in 2016, below consensus forecast of 25% in 2015 and 26% in 2016.

Chinese e-commerce giant Alibaba Group Holdingpriced its IPO, set to get under way tomorrow morning, at $68, the high end of an announced range of $66 to $68, which was raised on Monday from the prior range amidst apparently very strong demand.

Elsewhere in software land, shares of database giant Oracle (ORCL) slipped 70 cents, or 1.7%, in late trading, to $40.85, as the company reported fiscal Q1 results that missed analysts’ expectations, and a weak outlook for this quarter, and said founder and CEO Larry Ellison will give up the CEO spot to his two deputies, Safra Catz and Mark Hurd, and become chairman and CTO.

Amazon.com (AMZN) shares closed up $1, or 0.3%, at $325, after the company received positive initial remarks from the tech press about new models of its Kindle e-book reader and of its “Kindle Fire” line of tablet computers. Nevertheless, Piper jaffray‘s Gene Munster, a bull on the stock, questioned why Amazon continues to invest in hardware products when in his view they should just deliver services to all mobile devices.

Speaking of Amazon, RBC Capital Markets‘s Mark Mahaney reiterated an Outperform rating, and raised his price target to $435 from $380, citing favorable feedback from a survey of users of the same-day delivery service the company began to expand starting in May.

Shares of Tibco Software (TIBX) declined 96 cents, or almost 5%, to $19.80, after the company missed both fiscal Q3 expectations and the outlook for this quarter.

Software vendor Red Hat‘s (RHT) shares declined $1.60, or 2.6%, to $59.06, in late trading, despite the company beating fiscal Q2 expectations. The Q3 revenue forecast was short of consensus, but the company slightly raised its year view.

Qualcomm (QCOM) stock closed up 61 cents, or 0.8%, at $76.44, after Ericsson (ERIC) announced it would exit the baseband modem chip business, eliminating a second competitor for Qualcomm in just three months after Broadcom (BRCM) folded up baseband operations in June.

Nomura Equity Research‘s Anthony DiClemente reiterated a Buy rating on on shares of Google (GOOGL), and a $675 price target, based on a bright outlook for growth and profit at the company’s YouTube video unit.

Speaking of Google, Shares of display technology maker Himax Technologies (HIMX), which has partnered with Google, got a lift toward the end of the trading day, rising 21 cents, or 2.4%, to $8.91, after word circulated of positive remarks by the trading desk at boutique firm Northland Securities.

Analyst Thomas Sepenzis responded to my inquiry, saying he had not published anything. But a copy I obtained from one source contains remarks from Northland saying Sepenzis has heard that Google will pick Himax technology over a competing offering from Samsung Electronics (005930KS) that failed to meet Google’s requirements.

According to the remarks I’ve seen, the desk said “Tom would aggressively own HIMX at these levels due to his belief the Sept Q will be better than current consensus.”

Raymond James’s Tavis McCourt today updates the landscape of tablet computing with the results of a survey of 500 individuals in the U.S. his firm commissioned between March 13th and 17th, regarding their preferences on the devices.

Apple’s (AAPL) iPad, he finds, still rules the roost, relative to Amazon’s (AMZN) Kindle devices, Microsoft’s (MSFT) “Surface” machine, and various tables running Google’s (GOOG) with 35.5% share of tablets according to respondents’ comments on what device they have:

The following chart highlights the modest but consistent growth in tablet penetration that we have seen during the 18 months since we began asking respondents about their current tablet ownership. Over this period, tablet penetration has risen from roughly 46% to roughly 61%. The number of respondents reporting that they do not own a tablet has dropped from 54.1% in September 2012 to 39.5% today. iPad continues to dominate market share in our survey, with those reporting ownership of an iPad at 35.5%, up from 31.8% y/y and down slightly from 37.1% in December. Coming in second, Android/Google was 14.2%, down from 16.3% y/y but up from 11.2% in December. Amazon Kindle Fire share has maintained a narrow range from ~8-11% over the 18-month period, up to 11.4% from 11.2% y/y and 10.6% sequentially. Microsoft/Windows 8 tablet share remains in last place, coming in at 4% this quarter, its first time reaching the 4% level during our survey period, besting a previous high of 3.8% in September 2012.

Here’s his chart of the changes since 2012 in tablet ownership and brand share:

Happily, the number of people intending to buy tablets has reversed a declining trend, he writes:

After a clear trend where the percentage of respondents intending to use a tablet in the future was converging towards a similar percentage of those that already owned a tablet (i.e., a mature market), the trend has reversed over the last two quarters, rebounding to a high of 12.6% in December 2013 and coming in at 10.2% this quarter. Essentially, there are an increasing number of consumers that a year ago indicated they had no intention of purchasing a tablet, who today intend to. That is good news for tablet industry growth broadly.

McCourt offers the following dual slides to show that “iPad will remain dominant in North American consumer market for some time,” as he sees it, based on stable market share and stable buying intent from respondents.

He thinks “Microsoft Surface price points may get many of these potential Microsoft buyers to ultimately choose an Amazon or Android/Google tablet instead,” and that “With Microsoft’s announcement that it is bringing Office to the iPad, we believe it will be more difficult to ramp sales of its Surface product line and Windows tablets broadly.”

Amazon (AMZN) shares are up $15.29, or almost 5%, at $347.50, in late trading, after the company reported Q3 results that beat analysts’ estimates, but forecast this quarter’s revenue slightly below consensus.

The company said it lost 9 cents a share on revenue of $17.09 billion.

Analysts were expecting the company to report an operating loss of 11 cents a share, on revenue of $16.7 billion.

This marks the third consecutive quarterly loss for Amazon, despite rising sales; the stock jumped to record levels after its second-quarter miss in July.

CEO Jeff Bezos remarked that the company added millions of new members for its “Prime” service, which includes free shopping and things such as steaming video downloads that compete with Netflix‘s (NFLX) service. Bezos said the company had “brought online” 8 million square feet of new fulfillment center capacity, and that the company was hiring 70,000 temporary workers for the holidays.

He also touted the introduction in the quarter of new models of the company’s Kindle e-readers and Kindle Fire tablet computer. And Bezos said the company’s Amazon Web Services cloud computing operations had gotten “back to work” on a “large government contract,” obviously a reference to the shutdown this month of the U.S.government.

For the all-important fourth quarter, Amazon said it expects revenue of $23.5 billion to $26.5 billion, with a midpoint just below the $25.9 billion in revenue the Street is expecting.

Shares of Google (GOOG) are up $111.21, or over 12%, at $1000.00, crossing the magical thousand-dollar threshold for the first time, after the company last night beat Q3 expectations as revenue-generating ads rose 26% and the company claimed it was making progress on mobile. The shares have been above and below the $1,000 line in the last hour, with $1,007.40 being the high so far today.

Price targets are zooming this morning, though there don’t appear to be any actual ratings changes yet, that I can see.

“This is also a clear signal that the underlying core search business remains robust after 12 years.”

Even the bears seem charmed, with Dan Salmon of BMO Research this morning reiterating a Market Perform rating and and $890 price target, writing “we continue to believe that Google should see margin erosion over time as mix shift moves away from search, creating some risk for downward estimate revisions next year.”

“But it’s good to be a bellwether in an uncertain technology sector, and Google’s continued expansion of its international presence puts it in a great position to capitalize on a European economy that appears to be working through its trough.”

Shares of Advanced Micro Devices (AMD) are down 50 cents, or almost 13%, at $3.59, despite last night beating Q3 expectations and forecasting above consensus for Q4′s revenue as well.

Merrill Lynch’s Vivek Arya this morning cut the stock to Neutral from Buy, and cut his price target to $4.50 from $6, writing that the weak PC market is going to continue to offset upside from the video game console chip business.

The gross margin of 36% has some spooked. Adam Menaker of MKM Partners, reiterating a Market Perform rating, writes “the company is willing to emphasize topline acceleration vs. earnings acceleration.”

“We would get more positive on AMD’s long-term outlook were we to see semi-custom design wins outside game consoles, and share gains in server and embedded, although we are concerned that gross margins on those businesses won’t match those of computing.”

Analysts are still mulling the Q3 warning issued a week ago by Citrix Systems (CTXS), which was followed by the company’s announcement this week that CEO Mark Templeton will take a temporary leave of absence for family reasons.

Deutsche Bank’s Nandan Amladi, reiterating a Buy rating this morning, cut his price target to $80 from $82, writing that “Although the company did not clarify the reason why its results would fall short of prior guidance, we suspect that it could be continued slowdown in the Desktop business and macro headwinds in EMEA.”

“Numerous technology companies that have recently reported have indicated of weakness in EMEA. The Desktop business has been slowing in recent quarters, and it’s still early for XenMobile to offset the weakness in core Desktop business.”

Shares of Citrix are are down 25 cents, or 0.4%, at $57.

Shares of Amazon.com (AMZN) are up $11.98, or almost 4%, at $322.75, after UBS’s Eric Sheridan this morning raised his rating on the stock to Buy from Neutral, and raised his price target to $385 from $305, based on “our expectations for a re-acceleration of revenue growth and paid unit growth in Q4 and beyond (indicators being strong seasonal hiring trends, video game/console sales, easing paid unit comparisons, AWS)” and “the globalization of its Kindle ecosystem” and “its under-appreciated Advertising business.”

Sheridan’s colleague, Steve Milunovich, reiterating a Neutral rating on shares of Apple (AAPL), and a $520 price target, this morning cites data from privately held Good Technologies, which activates corporate mobile workers’ devices showing dominance by Apple’s iPhone and iPad. “iOS’s share of activations was 69% in 2Q and 72% in 3Q,” notes Milunovich. “The share of new Android activations rose from 23% in 4Q/12 to 30% in 2Q and was 27% in 3Q; iPad recovered its share momentum in new tablet activations from 84% in 2Q to 90% in 3Q though still below the 93% share in 4Q/12.”

Shares of Amazon.com (AMZN) are up *4.20, or 3%, at $266.80 today, a standout performer, rising at one point as high as $269.27.

The news programs have been pointing to the company’s announcement this morning of an expanded content agreement with CBS as a source of strength for the shares.

Amazon said it will feature “classic series” and “hit TV shows” from CBS and Showtime on its “Prime” instant video service, including “America’s Next Top Model” and “Everybody Loves Raymond.”

But Street analysts today were more interested in broad e-commerce trends and the business model for Amazon.

Piper Jaffray’s Gene Munster, who has an Overweight rating on Amazon shares and a $329 price target, writes today that data from market research firm ChannelAdvisor suggest that January sales saw 34% year-over-year growth, up from 30% in December, though it was lower than the 39% average for all of Q4. Given that ChannelAdvisor’s data “have led Amazon sales by only 12 percentage points,” the actual sales results for the current quarter are probably trending “in line” with his estimate for $16.15 billion and a penny per share, he thinks. That is slightly the Street consensus for $16.17 billion and 8 cents a share.

Topeka Capital Markets’s Victor Anthony, who has a Buy rating on the stock, looking at the same data, sees mild upside, writing that ChannelAdvisor’s data “implies North American growth would be 27.4%, an acceleration from the 23.0% reported in 4Q12, and slightly ahead of the 26.2% estimated in our model for 1Q13.”

Morgan Stanley’s Scott Devitt, who has an Overweight rating on Amazon, writes that without the content sales that come from Amazon’s Kindle e-book readers, its operating profit results would be even worse.

What he calls the Kindle “franchise,” which includes not just the hardware unit sales but also content sold to Kindle owners, produces 11% of Amazon’s sales and 34% of its consolidated segment operating income, according to his estimates.

Now, Devitt thinks Amazon’s enjoying much higher sales on e-books than he’d previously believed, based on commissioned survey results by his firm:

In our April 4, 2012 note on Amazon.com titled Longer Ramp to Margin Expansion Due to Variable Cost Structure, we estimated worldwide eBook unit sales of 567MM in 2012 based on a tie ratio of nine eBook purchases per eReader and three eBook purchases per tablet. Having recently conducted an AlphaWise survey on 1,108 owners of eReaders and tablets in the US, we believe the eBook market is actually much larger and will grow faster than we initially assumed. According to our AlphaWise survey of US consumers, eReader owners purchase on average ~2 eBooks per month and tablet owners purchase ~1 eBook per month. Given eBook tie ratios are probably lower outside the US and to factor in a discount in annualizing tie ratios, we take a 40% haircut to our AlphaWise survey tie ratios to arrive at ~13.3 eBook purchases per eReader and ~6.4 eBook purchases per tablet in 2012. Taking our new tie ratios and our updated forecasts on the installed base of eReaders and tablets, we estimate worldwide eBook unit sales of 859MM in 2012 (~50% higher than our initial forecast of 567MM). On the following page, we illustrate the changes in our estimates on the worldwide eBook market.

Devitt thinks Amazon may capture some market share in e-book sales, after losing share to Apple (AAPL) for quite some time.

Apple changed the e-book pricing model for the industry to the “agency” model, allowing for relatively higher prices. Amazon, in contrast, is willing to allow for much lower prices than the agency model.

Apple moved the eBook industry towards an agency model and turned off in-app purchasing for Kindle iOS apps, which we believed contributed to Amazon.com’s eBook market share declining from 60% in 2010 to 45% in 2012. However, five of the largest publishers (Penguin, Simon & Schuster, Hachette, Macmillan and Harper Collins) have settled with the Department of Justice over the past six months and terminated their agency agreements with Apple (Random House was not included in the litigation). While the initial settlement appears to last only two years and could include certain clauses that limit discounting (such as eBook retailers cannot cumulatively sell eBooks of a publisher at a loss over the period of a contract), we believe the movement back to a principal pricing model will greatly favor Amazon.com.

Amazon.com (AMZN) this afternoon reportedQ4 revenue and earnings per share that missed Street estimates, and forecast this quarter’s revenue lower as well.

Revenue in the three months ended in December rose 22%, year over year, to $21.27 billion, yielding EPS of 21 cents.

Analysts had been modeling $22.26 billion and 28 cents a share.

CEO Jeff Bezos remarked, ““We’re now seeing the transition we’ve been expecting. After 5 years, eBooks is a multi-billion dollar category for us and growing fast – up approximately 70% last year.”

“In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5%. We’re excited and very grateful to our customers for their response to Kindle and our ever expanding ecosystem and selection.”

The company said its Kindle Fire HD was once again the best-selling item of all items during the quarter, without disclosing unit sales:

For the second year in a row, Amazon’s tablet was the most popular item for customers – Kindle Fire HD continued its run as the #1 best-selling, most gifted, and most wished for product across the millions of items available on Amazon worldwide. At year-end, Kindle Fire HD, Kindle Fire, Kindle Paperwhite and Kindle held the top four spots on the Amazon worldwide best seller charts since launch.

For the current quarter, the company sees revenue in a range of $15 billion to $16 billion, below the consensus for $16.9 billion.

The company expects operating income in the quarter to decline from $192 million in the year-earlier period to a range of negative $285 million to positive $65 million, it said.

The street seems to like Google’s (GOOG) settlement with the Federal Trade Commission but not so some of its competitors. Following yesterday’s announcement that the search giant sign consent decree to change some of its practices in order to end in FTC investigation, the shares are rising $8.52, or 1.2%, at $732.19, and some analysts have raised price targets on the stock, but both Microsoft and yelp produced statements calling the settlement dissatisfactory.

Yelp (YELP) said in a statement, noted by Cnet’s Paul Sloan, that “The closure of the Commission’s investigation into search bias by Google without action, however, represents a missed opportunity to protect innovation in the Internet economy, and the consumers and businesses that rely upon it.”

And Microsoft (MSFT) general counsel Dave Heinerremarked that “We find it troubling that the agency did not adhere to its own standard procedures that call for the agency to obtain industry input on proposed relief and secure it through an enforceable consent decree.”

Are e-readers going away? The Wall Street Journal’s Greg Bensingerwrites today that the era of dedicated e-book electronic devices such as Amazon.com‘s (AMZN) Kindle and Barnes & Noble‘s (BKS) Nook may be nearing an end, citing data from research firms IDC and IHS i-Suppli that both show sales of such gadgets in unit terms declined into 2012 from 2011 even as the tablet computer market kept rising.

Samsung Electronics (005930KS) may widen its gap with Apple (AAPL) in smartphone sales this year, according to a new report from market research firm Strategy Analytics, cited this morning by Reuters’s Hyunjoo Jin. According to the analysts, Samsung may increase smartphone sales 35%, to 290 million units, ahead of 33% growth of Apple, at 180 million units.

Shares of Apple are off $12.73, or 2.4%, at $529.37, while shares of Samsung fell 1% overnight in Seoul trading to ₩1,525,000.

In advance of next week’s Consumer Electronics Show (CES) in Las Vegas, traditionally the primary personal computer event of the year, Microsoft continues to be dogged by concerns about sales of Windows 8 and its Surface tablet. Argus Research’s Joe Bonner today cut his rating on the stock to Hold from Buy based on his sense neither is trending well.

Shares of Microsoft are down 24 cents, or 0.9%, at $27.01.

Speaking of CES, there have been a raft of sell-side research notes this morning about what to expect at the show. One in particular predicts some gloomy news. Romit Shah of Nomura Equity Research opines we might hear bad news from some chip makers about weak trends in their markets. “We have not found tangible evidence that indicates estimates for most of our universe have bottomed,” writes Shah.

“In analog, we believe December bookings were weaker than expected due to continued disti inventory draw-downs at Texas Instruments (TXN), Xilinx (XLNX), Maxim Integraded Products (MXIM), and a couple discrete companies.”

Pacific Crest’s Bartley sees consumers gravitating toward the $199 7-inch Kindle Fire HD and less so toward the other models in the lineup.

Pacific Crest’s Chad Bartley this morning reiterates a Sector Perform rating on shares of Amazon.com (AMZN), after his supply chain “checks” suggested to him that the company’s “Kindle Fire” tablet computer, based on Google‘s (GOOG) Android operating system, is not selling as well as he’d previously thought.

Bartley now models Amazon selling just 6 million units this quarter of the Fire, down from 8 million previously, and 10.5 million for all of 2013, down from 12.5 million previously. While his investigation of the supply chain last month suggest component orders had risen for both October and November by double digits, he now thinks total Q4 component orders fell by more than 20%.

Also, Bartley sees a shift in buying patterns in the data, with consumers perhaps choosing the 7-inch Kindle Fire “HD,” which costs $199, while eschewing both the cheaper $159 standard-definition model, and also the more expensive 9-inch Fire.

Writes Bartley, “Although weak Kindle Fire de- mand is potentially positive for profitability, it does imply that Amazon is still struggling to compete against Apple (AAPL), and may even be seeing competition from Google.

“This could make it more difficult for Amazon to drive incremental purchases of digital media and physical products over the longer term.”

Bartley’s estimate for this fiscal year goes to $62.11 billion in revenue from a prior $62.57 billion, while his EPS estimate stays at $2.37. His 2013 estimates go to $78.23 billion and $2.70 per share from a prior $78.94 billion and $2.60 per share.

Amazon shares today are up $6.92, or 2.7%, at $260.78.

Update: If Bartley’s view on the Kindle Fire seems harsh, it is. When I inquired as to why the units projected for next year seem to be so low compared to what is projected this quarter, Bartley replied in an email that there are three reasons for his view. The first is that “demand seems weak,” the second is that “the Fire seems to be a highly seasonal item,” implying there might be little sales outside of a holiday quarter of any year, and thirdly, that he expects the standard-def model of the Fire to go away next year, as well as, perhaps, the 9-inch models “due to poor demand.”

Bartley tells me that total Kindle Fire sales of 10.5 million next year would be a decline from what he’s projected for this year of 11.8 million total sales.

Of course, Amazon has never disclosed unit sales for any Kindle device, so Bartley and others can only speculate about unit numbers.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.